Every year, Canadian residents are required to file a tax return. By doing tax planning with us, you will know what to expect and you will feel more in control of what your tax year looks like — all thanks to some common strategies we implement with our clients.
The most commonly understood strategy is for you to make deductions from your taxable income. Examples of tax-deductible items are RRSP contributions, child care expenses and professional fees.
You can also defer paying tax on investment income by contributing to an RRSP or a TFSA. However, be aware that you will have to pay tax when you redeem from your RRSP — or for those 71 years old or more, your RRIF — later on. Using your RRSP, RESP, TFSA, different types of life insurance policies and various other types of investment products are the most common tax deferral strategies.
Finally, you can do something called income splitting with your spouse or common-law partner. This means transferring eligible income to the lower income spouse to take advantage of being in a lower income tax bracket. Some eligible sources of income would be your Spousal RRSP, the Canada Pension Plan and your workplace pension income.
Tax planning is just one part of a much larger financial plan. If this feels overwhelming, give us a call or click here to book your free consultation today. We can help you with tax planning — and more!